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This article is part of an MIT SMR initiative exploring how technology is reshaping the practice of management.

What distinguishes companies that have built advanced digital capabilities? The ability to collaborate. MIT Sloan Management Review’s research finds that a focus on collaboration — both within organizations and with external partners and stakeholders — is central to how digitally advanced companies create business value and establish competitive advantage. These companies recognize that digital transformation blurs — and sometimes obliterates — traditional organizational boundaries and demands a focus on cooperation and collaboration that is unprecedented for most enterprises.

The broad implications of this finding are evident in three separate research projects MIT SMR conducted over the past three years: a recent survey-based research report on digital business trends, “Achieving Digital Maturity,” produced in partnership with Deloitte Digital; a separate survey-based research project focused on the internet of things (IoT); and a case study project exploring data-driven organizations.

While the benefits of collaboration are clear, so too is the reality that many organizations still have a long way to go in making collaboration the priority it needs to be. Less than half of the respondents to our 2016 digital business survey agreed or strongly agreed that “our organization is increasingly organized around cross-functional project teams, not necessarily functions and divisions, to implement digital business priorities.”

More Cross-Functional Collaboration

Based on a global survey of more than 3,500 managers and executives, MIT Sloan Management Review and Deloitte’s third annual report on digital business found that the most digitally advanced companies — those successfully deploying digital technologies and capabilities to improve processes, engage talent across the organization, and drive new value-generating business models — are far more likely to perform cross-functional collaboration. More than 70% of these businesses use cross-functional teams to organize work and charge them with implementing digital business priorities. This compares to less than 30% for organizations in an early stage of digitization.

Digitally advanced organizations recognize and reward collaboration and cross-functional teams — nearly 77% of digitally advanced businesses do, versus 34% of the least digitally sophisticated group of companies. “It’s just more difficult to think about any function in isolation because the processes are becoming so integrated,” said David Cotteleer, vice president and CIO at Milwaukee, Wisconsin-based Harley-Davidson Inc.

As an example, Cotteleer pointed out that connected vehicles demand a stringent cross-functional approach to design and manufacture. “It’s no longer just about product engineering,” he said.